I like the idea of private money, and privatization in general, particularly in light of the most recent context of governmental corruption, ineptitude, and downright fascist behavior. Less power (and money) to the government means more power to individuals - and this is good for both government and individuals. From a global point of view, I think Germany is taking a step in the right direction, though the better step would be "laissez-faire" 100% and not tax Bitcoin at all. Small progress is better than no progress, and it's good to celebrate such progress even when it is not part of our own country(s).

In response to a query by a member of parliament, the German Finance Ministry has declared (Google Translate) that it accepts bitcoins as a “unit of account.” The Ministry added that bitcoins are a sort of “private money” and that mining bitcoins constitutes “private money creation.”

The thing is, most mining takes place in mining pools, where the mining pool operator gets the newly-created bitcoins and uses the proceeds to pay for the hashing services of the pool members.

In this context, does the income received by a mining pool member count as standard income (like working a job and getting paid) or is it "private money creation"?

Less power (and money) to the government means more power to individuals - and this is good for both government and individuals. From a global point of view, I think Germany is taking a step in the right direction, though the better step would be "laissez-faire" 100% and not tax Bitcoin at all. Small progress is better than no progress, and it's good to celebrate such progress even when it is not part of our own country(s).

If you feel that way, come over to Germany and live here a while. By American standards, Germany is a socialist country which should have gone to hell several years ago.

This just shows how draconian USA is to anything that interferes with the powers that be, while strong countries such as Germany shows tolerance and understanding towards new ideas and concepts. Yeah I would move to Germany seeing the difference of how something like Bitcoin is being treated in the two placed.

Umm... I don't really see how the idiocy from the middle of the article relates in any way to the reporting from the first section.

Also ouch... bad news for Bitcoin. It was already next-to-useless as a currency because of its value fluctuations, but now people will actually need to pay taxes based on those unwanted fluctuations (i.e. capital gains).

Also ouch... bad news for Bitcoin. It was already next-to-useless as a currency because of its value fluctuations, but now people will actually need to pay taxes based on those unwanted fluctuations (i.e. capital gains).

Not a problem - if for whatever reason you (re)sell your Bitcoins within a year AND in doing so you make a gain (and even after the capital gains tax you will of course still have some nett income from that) then you're surely happier than if this didn't happen (i.e. you still sold but made a loss). Unless of course it's only this event that tipped you into having any CGT matters at all, in which case maybe you're personally miserable from all the extra paperwork. But taxation in Germany is already pretty convoluted (allegedly 1/6th of all writings about tax concern the German system, which either means Germans really like reading about tax or the system takes a lot of understanding) so probably it doesn't much complicate your life.

This just shows how draconian USA is to anything that interferes with the powers that be, while strong countries such as Germany shows tolerance and understanding towards new ideas and concepts. Yeah I would move to Germany seeing the difference of how something like Bitcoin is being treated in the two placed.

I'm not sure why you think it is being treated any differently in Germany than in the US. It isn't.

That view was in contrast to another economic giant of the era, John Maynard Keynes, who believed government spending could help steer a national economy in the right direction. (Their debate is best summed-up in this rap.)

Sorry to be nitpicking pain, but why are you using a bit.ly link here? This isn't twitter... Although I trust Ars not to put up dodgy links, seeing URLs obfuscated unnecessarily in this way always makes me cringe.

Raid your house and show you have the private key for a bitcoin account on your computer, or have the NSA monitor your internet traffic and purchases of bitcoins.

Note that "a given bitcoin" doesn't exist. There is one big accounts database (the Block Chain), that shows which account numbers have what balance among the 11.5 million total units currently available. One unit is called "a bitcoin", but it is a unit of measure like one unit of length is "a meter". Thus accounts have a size or balance measured in bitcoins, but bitcoins themselves are not a "thing".

The proper way to frame your question is who owns a given bitcoin account number? The evidence of ownership is having the private key that allows you to sign transactions and move some or all of your balance to another account. Since private keys are just 160-digit numbers, they are pretty easy to hide if you want to hide them. The Block Chain is public, so everyone knows what the balance of every bitcoin account is. What is not known is who owns each account.

Austrian economics very much has the psychology of a cult. Its devotees believe that they have access to a truth that generations of mainstream economists have somehow failed to discern; they go wild at any suggestion that maybe they’re the ones who have an intellectual blind spot. And as with all cults, the failure of prophecy — in this case, the prophecy of soaring inflation from deficits and monetary expansion — only strengthens the determination of the faithful to uphold the faith.

It would be sort of funny if it weren’t for the fact that this cult has large influence within the GOP.

That view was in contrast to another economic giant of the era, John Maynard Keynes, who believed government spending could help steer a national economy in the right direction. (Their debate is best summed-up in this rap.)

Sorry to be nitpicking pain, but why are you using a bit.ly link here? This isn't twitter... Although I trust Ars not to put up dodgy links, seeing URLs obfuscated unnecessarily in this way always makes me cringe.

Amen ... I never follow bit.ly's, it's like some one saying if I want to go somewhere I have to be blindfolded with headphones on ... no thanks. Twitter should have just shortened the way URLs appear in tweets so when you hover over them you can see where the URL path actually leads in the status bar.

Also ouch... bad news for Bitcoin. It was already next-to-useless as a currency because of its value fluctuations, but now people will actually need to pay taxes based on those unwanted fluctuations (i.e. capital gains).

Tax evasion is a criminal offence in most nations, so there are broad powers for investigation, including accessing your banking records. If you have income transactions, then you better be able to explain where they came from and show that you paid the relevant taxes, otherwise you could get audited and sent to jail.

This seriously annoys me. But yet again, quite typical for the incompetent, jealous governments to do such a thing which completely falls and fails under their control. they have no authority to settle "laws" or "regulations" to please them as they see fit. In short, regulations will never work on a decentralized, non stop currency system.

That view was in contrast to another economic giant of the era, John Maynard Keynes, who believed government spending could help steer a national economy in the right direction. (Their debate is best summed-up in this rap.)

Sorry to be nitpicking pain, but why are you using a bit.ly link here? This isn't twitter... Although I trust Ars not to put up dodgy links, seeing URLs obfuscated unnecessarily in this way always makes me cringe.

Yes, the expanded link also leads to a YouTube video which I wouldn't have bothered with.

This seriously annoys me. But yet again, quite typical for the incompetent, jealous governments to do such a thing which completely falls and fails under their control. they have no authority to settle "laws" or "regulations" to please them as they see fit. In short, regulations will never work on a decentralized, non stop currency system.

edit: Wow, downvote rage here, please explain. I would appreciate it.

If their Bitcoins get converted into real money or goods then they represent real, not just notional income.

That said, it's probably not unreasonable that they pay tax on them, just like every other source of income.

Less power (and money) to the government means more power to individuals - and this is good for both government and individuals. From a global point of view, I think Germany is taking a step in the right direction, though the better step would be "laissez-faire" 100% and not tax Bitcoin at all. Small progress is better than no progress, and it's good to celebrate such progress even when it is not part of our own country(s).

If you feel that way, come over to Germany and live here a while. By American standards, Germany is a socialist country which should have gone to hell several years ago.

*koff* Hartz IV *hust*

Also, Germany has neither socialized medicine nor universal coverage (although generally the people who don't have health insurance are people who tried to game the system for monetary gain and lost)

Austrian economics very much has the psychology of a cult. Its devotees believe that they have access to a truth that generations of mainstream economists have somehow failed to discern; they go wild at any suggestion that maybe they’re the ones who have an intellectual blind spot. And as with all cults, the failure of prophecy — in this case, the prophecy of soaring inflation from deficits and monetary expansion — only strengthens the determination of the faithful to uphold the faith.

It would be sort of funny if it weren’t for the fact that this cult has large influence within the GOP.

You should at least mention that that's a Krugman quote. He's a smart man, but he's also the most transparently political economist in public life right now, an extremely polarizing figure. You really have to consider the source when reading his stuff, especially stuff he writes in the NYT (as opposed to an actual academic paper).

I'm not saying he's entirely wrong, in this instance; people who go extremist libertarian can become almost religiously fanatic, and can use Austrian school economics as an intellectual basis for this faith.

But the same thing can be said about people who go extremist socialist using Keynesian economics as their intellectual basis without thinking about the context and what Keynes was actually going for (Like having budget surpluses during periods of economic growth).

The problem comes from using economic theory to prop up one's own, preexisting political positions, instead of treating it more like a science.

This seriously annoys me. But yet again, quite typical for the incompetent, jealous governments to do such a thing which completely falls and fails under their control. they have no authority to settle "laws" or "regulations" to please them as they see fit. In short, regulations will never work on a decentralized, non stop currency system.

edit: Wow, downvote rage here, please explain. I would appreciate it.

I suggest you review the tone of your post, it comes off as off-topic and uninformed.And yes, the government certainly has the authority to weigh in on this topic, they're the ones that are chosen to set the rules. For the most part this seems like a sane ruling, bitcoins look a heck of a lot like a private currency: their supply is privately controlled and they sure seem like a currency. Additionally centralization has nothing to do with it; the US government's control over the supply of dollars has very little to do with the requirement that investors report income made with said dollars as the government is often not a party to these transactions.

Eh, at least Germany is somewhat consistent. They will mostly let you do what you want as long as they get their cut.

Take prostitution for example. Completely legal. You can go online and reserve a girl for later from one of the many boutique brothels, then go and have your fun at the time you reserved her. Of course, all of this is taxed.

It's intrusive, but in a different way. Germany isn't saying "you can't have this currency because we're scared that it will topple our financial system, take control away from us, or allow black market trading".. they're really saying they just want a taste.

I like the idea of private money, and privatization in general, particularly in light of the most recent context of governmental corruption, ineptitude, and downright fascist behavior. Less power (and money) to the government means more power to individuals

By "More power to individuals", you obviously mean "More power to corporations and people with obscene amounts of money." Cause I guarantee you that the ones getting more power if that happens are not the ones on Skid Row.

Quote:

I think Germany is taking a step in the right direction, though the better step would be "laissez-faire" 100% and not tax Bitcoin at all.

Why? Do you honestly have a good reason for why Bitcoin should be treated special, or are you just going on another anti-government, anti-tax rant?

In response to a query by a member of parliament, the German Finance Ministry has declared (Google Translate) that it accepts bitcoins as a “unit of account.” The Ministry added that bitcoins are a sort of “private money” and that mining bitcoins constitutes “private money creation.”

The thing is, most mining takes place in mining pools, where the mining pool operator gets the newly-created bitcoins and uses the proceeds to pay for the hashing services of the pool members.

In this context, does the income received by a mining pool member count as standard income (like working a job and getting paid) or is it "private money creation"?

Is the mining pool owner expected to report capital gains?

I would imagine it runs kinda like an investing club, or maybe a mutual fund. Each member would get a dividend of Bitcoins, and that would be taxed. The person running would probably also have to pay taxes.

This seriously annoys me. But yet again, quite typical for the incompetent, jealous governments to do such a thing which completely falls and fails under their control. they have no authority to settle "laws" or "regulations" to please them as they see fit. In short, regulations will never work on a decentralized, non stop currency system.

edit: Wow, downvote rage here, please explain. I would appreciate it.

You got downvoted because your post is entirely non-sensical, and proves that you didn't actually read the article.

I thought one thing all you Bitcoin nutters wanted was for your Monopoly money to be taken seriously. This is a government taking it seriously, and applying the same, common sense rules to it as everything else.

Income based taxes will be dead in the future. There will be so many digital method to conceal money into digital goods and traded to avoid taxation.

A drug dealer can easily tax all of its cash and buy digital goods and then transfer it globally and then exchange without getting caught once it's in digital form.

Consumption tax is easier to use.

You don't know what you're talking about, but that's a trait common to a lot of bitcoin advocates.

Transactions can easily be tracked through the blockchain. Bitcoin isn't some magical money laundering device, and it's not nearly as anonymous as you'd like to believe.

Income taxes will exist as long as the laws demand that they exist. Tax evasion is illegal, and people are prosecuted for it all the time. Bitcoin is actually easier to trace than cash transactions, and even cash only businesses are frequently audited and prosecuted.

Austrian economics very much has the psychology of a cult. Its devotees believe that they have access to a truth that generations of mainstream economists have somehow failed to discern; they go wild at any suggestion that maybe they’re the ones who have an intellectual blind spot. And as with all cults, the failure of prophecy — in this case, the prophecy of soaring inflation from deficits and monetary expansion — only strengthens the determination of the faithful to uphold the faith.

It would be sort of funny if it weren’t for the fact that this cult has large influence within the GOP.

You should at least mention that that's a Krugman quote. ...

... I'm not saying he's entirely wrong, in this instance; people who go extremist libertarian can become almost religiously fanatic, and can use Austrian school economics as an intellectual basis for this faith.

More often than not, individuals I know are either both or neither. That is, religiously fanatic about their religion and their libertarianism. It suggests to me that there is a common psychological element driving both areas of extremism in these individuals.